Raúl Prebisch and the evolving uses of ‘centre-periphery’ in economic analysis

Abstract

This inquiry considers the evolving appearances and applications of ‘centre-periphery’ in economic analysis advanced especially by the Argentine economist Raúl Prebisch. We find the origins of a ‘centre-periphery’ approach in The Isolated State (1826) authored by Johann Heinrich von Thünen and we acknowledge and consider those who disseminated Thünen’s ideas to Argentina, where Prebisch studied and took on major responsibilities already during his 20s. While Thünen lays out distinct ways to employ a ‘centre-periphery’ analysis, Prebisch remains true in essential ways, but also goes beyond Thünen’s original intentions, using ‘centre-periphery’ as a versatile and convenient tool for the analysis of different economic and financial phenomena from the 1920s to 1940s. In 1949 Prebisch was launched onto the world stage at the United Nations Economic Commission for Latin America where he introduced this ‘centre-periphery’ concept, using it to describe asymmetric relations between Latin American economies and centres in the industrialized North. This approach was picked up and further refined into what is known as Dependency Theory that included an understanding of a symptom of regional and national inequalities known as ‘underdevelopment’. Some years prior to his passing in 1986, ‘centre-periphery’ had evolved further, providing a methodological approach for the field of ‘World Systems’.

From our perspectives as co-authors, Raúl Prebisch (1901–1986) registers as Argentine’s singular most prominent economist. He could also be considered the most prominent economist representing Latin America. His active intellect and dedication towards dealing with developmental challenges, which faced his native Argentina—and later in his career, all Latin America—led Prebisch to consider a wide array of topics and employ various approaches to economic analysis. Topics developed in his research papers ranged broadly from business cycles, including monetary cycles, to tendencies found in commodity prices. With United Nations’ economist Hans Singer, Prebisch is co-credited for recognizing the tendency for commodity prices to stagnate relative to prices of manufactured goods, a tendency borne out by data in the late nineteenth century and first part of the twentieth century.

In his early years leading up to the decade of the Great Depression, Prebisch would be considered as a conservative economist defined by his diehard advocacy for laissez-faire policies and his professional ties to La Sociedad Rural Argentina¹—a syndicate of landowners in his native Argentina. With the persistence of the downturn during the 1930s and the shift in the international balance of power, Prebisch reoriented his thinking to underline the potential importance that public sector policies could play in promoting industrialization of economies located on the periphery of the world economy. But whether an advocate of laissez-faire policies or a promoter of import-substitution industrialization, Prebisch found opportunities for bringing a ‘centre-periphery’ approach into economic analysis.

Our inquiry demonstrates how Prebisch’s uses and applications of ‘centre-periphery’ evolved over the course of three decades, starting early in the 1920s and stretching into the late 40s. As we consider the evolution of ‘centre-periphery’ in Prebisch’s economic analysis, we can also note how his pioneering efforts helped promote the field of Development Economics. Related to his use of ‘centre-periphery’, we can identify a subfield known as ‘Dependency Theory’ that appears to have morphed into a ‘World Systems’ approach that divides the global economy into countries forming advanced ‘centres’ and with many of the remaining countries forming what has been referred to as ‘periphery’.

1 The extant literature

Prebisch’s early years as an economist have tended to remain neglected. However, we can note ‘The Unfamiliar Raúl Prebisch’ authored by Carlos Mallorquin that appears as a chapter in Ideas, Policies and Economic Development in the Americas (2007), a book coedited by Esteban Pérez-Caldentey and Matías Vernengo. In his chapter, Mallorquin (2007, pp. 98–122) argues that, although the conjugal term centre-periphery can be found in Prebisch’s early works, it was not until May of 1949 in La Habana, Cuba, that Prebisch presented a lecture entitled El Desarrollo Económico de America Latina y Algunos de sus Principales Problemas.² Prebisch’s 1949 Havana presentation offered at that time an altogether novel interpretation of ‘centre-periphery’. In the view of Mallorquin (2007, p. 110), the way in which Prebisch defines ‘centre’ and ‘periphery’ in this Manifesto represents a clean break with his earlier understandings, as Prebisch had fully transposed this abstract spatial notion to the real economy. Rather than depicting differences in capital movements, as he had in his earlier research documents, in this Manifesto Prebisch employs the spatial understanding of ‘centre-periphery’ in order to demonstrate the concrete economic reality, namely, the structural divisions of international labour. While Prebisch’s use of ‘centre-periphery’ back in 1949 is important to consider, Mallorquin does not inquire into the how and when Prebisch got started introducing this approach in economic analysis.

Since their 2007 publication, Pérez-Caldentey and Vernengo (2012, 2015, 2016, 2018) advanced additional and valuable contributions that consider Prebisch’s research efforts prior to his starting to work for the UN’s Economic Commission for Latin America (ECLA) in 1949, a department of the United Nations that is also known in Spanish language as Comisión Económica para América Latina, or CEPAL—with those employed at CEPAL sometimes noted affectionately as Cepalians.

Pérez-Caldentey and Vernengo (2012) argue that in his inquiries into business cycles, Prebisch advanced the idea that the world economy could be understood as having one unified cycle that originated from a central economy, but which engendered varying effects on economies composing a periphery. Pérez-Caldentey and Vernengo (2018) also emphasize the level of sophistication and the importance of Prebisch’s use of ‘centre-periphery’ in his dynamic theory that appeared in 1948 with the publication of ‘Manuscritos de las clases dictadas por Raúl Prebisch en Buenos Aires sobre la dinámica económica’.³ In the view of Pérez-Caldentey and Vernengo (2018), Prebisch’s ‘concept of economic space of centre-periphery’ differentiated monetary flows as well as the location of production in a structurally fractured world economy. These co-authors (2018, p. 17) argue that productive and circulative economic processes defined ‘the essence of Prebisch’s dynamic theory’ of world capitalism.

Pérez-Caldentey and Vernengo (2012, pp. 13-4) also identify what they suggest are the early Keynesian influences that appear in Prebisch’s works. As an example, the co-authors cite that Prebisch had adapted John Maynard Keynes’ concept of multiplier to a ‘foreign trade multiplier’ to help account for a greater than expected increase in national income as a consequence of additional financial flows resulting from exports (Pérez-Caldentey and Vernengo 2012, p. 13). In ‘Reading Keynes in Buenos Aires: Prebisch and the Dynamics of Capitalism’, Pérez-Caldentey and Vernengo (2015, p. 2) cogently argue that, although considered an exponent of Keynesian economics in Latin America, Prebisch’s approach differs from Keynes’ intentions fundamentally in its ‘object and method of analysis’. As to whether Prebisch altogether rejected all ‘static’ and ‘equilibrium’ approaches to economics—either Keynesian or classical—the co-authors observe that he kept his analyses focused upon dynamics which he surmised could best explain historical specificities associated with actual geographical locations within distinct timeframes.

Differences in approaches highlighted by Pérez-Caldentey and Vernengo (2015) prove to be of fundamental importance, signalling the range of topics that Prebisch would explore and advance as a professional economist. Though Pérez-Caldentey and Vernengo offer truly novel and welcomed insights into Prebisch’s evolving understanding of ‘centre-periphery’ as well as Keynesian influences in his thinking, we shall demonstrate that there are some less known influences—especially of German economists—that may have played a fundamental role in the evolution of Prebisch’s thinking and his ‘centre-periphery’ concept in particular.

Our readings suggest that over key years of his career as a professional economist, Prebisch’s understanding of ‘centre-periphery’ evolved beyond his early studies of business cycles, deriving a novel contribution from these studies. After considering the extant literature on this subject of ‘centre-periphery’ and its appearances and uses in Prebisch’s contributions, what our inquiry now seeks to establish is that in his research efforts Prebisch remained consistent in differentiating and dividing economic activities into a ‘centre’ and a ‘periphery’. His consistency follows tendencies found in a larger body of research into the regional, national, and world economy.

2 Perspectives on Prebisch’s likely influences

We are of the understanding that Prebisch’s use of ‘centre-periphery’ evolved as a concept and in its application. Prebisch employed ‘centre-periphery’—both directly or indirectly—towards the start of his professional career and advanced its practical applications in economic analyses. As early as 1921, and in the article ‘Anotaciones sobre nuestro medio circulante’,⁴ nascent applications of ‘centre-periphery’ were already found. Over the next years Prebisch generated a series of articles that led up to ‘El papel de las inversions en los movimientos cíclicos Argentinos’⁵ published in 1944. What we can observe and note is that in the five articles published between 1921 and 1944, Prebisch continually advanced—and further refined—different applications of a ‘centre-periphery’ approach in economic analysis.

Prebisch (1987), himself, considered the 5-year period from 1943 to 1948 as his ‘first’ intellectual stage in which he developed his dynamic theory of the economy, while also refining his spatial and economic understanding of ‘centre-periphery’. In its widely known version—presented to the world in the 1949 Manifesto—Prebisch advanced a novel understanding of centre-periphery. This was not intended to be prescriptive, but rather to serve as a descriptive term identifying a ‘structural fracture’ rooted in historical economic formation of the world economy and emerging institutions related especially to the legacies of Pax Britannica. For Prebisch, the ‘international division of labour’ served as a causal force contributing to ‘declining terms of trade’ that would—at least empirically—challenge the validity of the dominant trade model advanced by David Ricardo, a paradigm that had been effectively used to render territories composing the British Empire as sources for capital accumulation based upon notions of specialization and comparative advantage. This structural fracture caused by international trade and specialization affected the location of production as well as the global distribution of income and was thought to have emerged worldwide as an outcome of international trade taking place between regions that economic forces had distinctly rendered as either centres or peripheries.

During an interview with Manuel Fernández López (1942-2013)—a professor of Argentine economic history and economic thought—and when asked about his original source of ‘centre-periphery’, Prebisch claimed that he had invented the term. Fernández López (1996, pp. 28-9) doubts this to be the case, highlighting that this term had been used and applied long prior to Prebisch’s steady stream of publications and by a number of authors from Argentina as well as other parts of our world. Fernández López raises a number of possible sources of influence, as the term ‘centre-periphery’ and related meanings were also utilized by Neoclassical economists, such as: Ralph George Hawtrey (1879–1975); American institutionalists, like William Adams Brown, Jr. (1894–1957); and Argentine writers, as for example Juan Bautista Alberdi (1810–1884).

Fernández López (1996, pp. 28-9) points out that of these thinkers, Hawtrey (1927, pp. 99-100)—with whose work Prebisch was familiar during his years of neoclassical ‘fervour’—mentions that the 1922 Genoa Conference utilized the term ‘gold centres’ in order to refer to the countries whose currencies were convertible into gold in the proposed monetary system of ‘gold exchange standard’.

Fernández López (1998, p. 58) also cites the Argentine political theorist, writer, and diplomat Juan Bautista Alberdi [1886] (1956, p. 16), who applied the concept of ‘centre’ to European economies. Fernández López (1998, p. 58) also reminds us that Alberdi was in fact the first Argentinian to apply Clément Juglar’s (1862) research into business cycles in an attempt to understand the 1873–1875 economic downturn that struck Argentine’s economy so profoundly. Given Prebisch’s focus on business cycles, then it becomes easy to assume that he was also well versed in Alberti’s writings. In addition, Fernández López (1996, pp. 28-9) notes that William Adams Brown, Jr. (1940, pp. 402, 422, 433 1052, 1073, 1260, 1262), from America’s National Bureau of Economic Research, used a ‘centre-periphery’ approach as an analytical category.

In the view of Oreste Popescu (1913–2003)—a Romanian economist who lived and worked for many decades in Argentina—Prebisch’s understanding and uses of ‘centre-periphery’ can be rightly traced all of the way back to the legacy established by Friedrich List, a legacy disseminated throughout the Argentina by Alejandro Bunge and other contributors to Revista de Economía Argentina,⁶ the Argentine journal that Bunge edited up until his death in 1943. Popescu (1986 [1997], p. 270) writes that from List’s doctrines:

Prebisch infers all the rest of his analytical and political economic ideas:

the imperative of industrialization; the tendency towards deterioration of exchange rates; structural inflation and unemployment; the imperative of a common market; and the discipline of Latin American development.

Bunge had also applied the principle of ‘centre-periphery’ as a geospatial division for economic regions by redefining Argentina’s territory by three concentric rings, with Buenos Aires located at the centre. This was developed in ‘Desequilibrio económico national’,⁷ Bunge’s 1925 article that initially appeared in his Revista de Economía Argentina. This article was later revised and expanded, appearing in his book Una nueva Argentina⁸ (1940).

3 Origins and some uses of ‘centre-periphery’ analysis

Regarding its origins in the literature, our research traces the appearance of a ‘centre-periphery’ approach back to Germany during the third decade of the nineteenth century and the publication of Der isolierte Staat⁹ (1826). That is, Johann Heinrich von Thünen’s The Isolated State registers as the pioneering contribution that frames ‘centre-periphery’ through a cartographic model which divides production into two parts—through contrasting urban with rural activities. Our reading is that during his student years at the Universidad de Buenos Aires, Prebisch was introduced to the writings of Thünen—and also to those of one Wilhelm Launhardt (1832–1918), who is often lauded as a German mathematician. We are inclined to conjecture that the writings of Thünen and Launhardt were widely read in Argentina and they may have inspired and influenced a whole generation of Argentinean economists. Departing from these teachings, Prebisch would then integrate a ‘centre-periphery’ approach into his research and analyses, and he would carry this forward for some decades, but through adapting this method in order to try to shed light on changing economic issues.

Serving as a key reference for our inquiry, Thünen’s model introduces an urban centre that is also surrounded by agricultural lands, with all integral parts displaying asymmetrical productivity levels—and differing transport costs. From this consideration of hypothetical endowments and costs, Thünen introduces a spatial model that optimally distributes economic activities with respect to their value-added and distances from the urban centre where the market is located. The rural area that surrounds the urban centre is a nexus of concentric rings. Thünen’s model graphically expresses how physical distribution of productive activities—with respect to their economic values—would appear around a market hub.

Following Thünen’s pioneering lead and premises that he had advanced years earlier, Wilhelm Launhardt registers as the first—whom we can document—to formulate a spatial theory that denotes industrial location in geographic space. As a German mathematician and engineer with interests in Economics, Launhardt established his reputation as one of the founders of the field of Mathematical Economics. In addition, he also developed a theory of ‘production location’ based upon Thünen’s original model.

Towards the end of the nineteenth century, and following Thünen’s pioneering research, we can identify two of the most prominent schools of thought in the German-speaking realm. Both the jünger Historical School of Gustav von Schmoller and the Marginalist School carrying on the Austrian tradition initiated by Carl Menger embraced von Thünen’s notion that production could be spatially divided and with areas defined through their specializations.

The members of the German Historical School also expressed a world division of production based upon similar premises as Thünen’s understanding of the importance of geographic specialization. However, contributions advanced by exponents of the Historical School differed in two respects. Rather than focusing upon the organization of local or regional productive units, this guiding principle was applied to consider a much broader picture, that is, of a world economy in which groups of national economies specialized either in manufacturing or production of basic commodities. The second difference is that instead of formulating a model or theory, exponents of this Historical School offered only written descriptive analyses of a world economy. One example of the application and use of centre-periphery within this tradition of Historismus can be found in the writings of Werner Sombart, in particular. In Der modern Kapitalismus¹⁰ [1902], Sombart utilizes the framework and division into centre and periphery as he considers location of production across the world economy, with one region concentrated on production of manufactures and others concentrated on production of commodities. Sombart [1902] (1928, pp. xiv-xv) can be quoted:

We must […] distinguish a capitalist centre – the central capitalist

nations – from a mass of peripheral countries viewed from that

centre; the former are active and directing the latter passive and serving.

Some marginalists advancing what can be defined as an Austrian tradition applied Thünen’s approach differently, purporting that economic specialization of urban and rural areas would indeed emerge as distinct—quite simply though the interplay of market forces and technological innovation. It can be noted that one Friedrich von Wieser emerged as one of the leading figures of the Marginalist school in Austria. According to Wieser, the segregation of urban and rural areas registers as the essential manifestation of the ‘economic localization of industry’. The research of Wieser [1914] (1927, p. 314) also suggests that Thünen established general principles for a theory of industrial location that relates to a national division of labour; ‘the division of town and country is a historical result of the articulation of labour’. However, it remains important to consider that Wieser [1914] (1927, p. 317) complained that actual urban centres—with their surrounding countryside—were not actually arranged on the bases of ideal premises; as production in the countryside emerged given the availability of natural resources and technology. Wieser [1914] (1927, p. 317) also reminds his readers that once urban centres were founded, ‘historical power is conservative and favours the older industrial centres’. He concludes by stating that only changes brought forth by technological innovation—and those that could be applied to other types of primary resources—are positioned to generate the formation of new productive areas, and eventually new centres that might undermine established industrial locations.

Towards the end of the nineteenth century at the University of Buenos Aires in Argentina, both the Historical and Marginalist traditions were not only represented, but also passionately debated. Clearly, Thünen’s Isolated State was read and earnestly considered as a seminal contribution to methodology and economic analysis. In his article ‘Early Liberal Socialism in Latin America: Juan B. Justo and the Argentine Socialist Party’, author Carlos Braun (2008, p. 577) stresses that the Argentine politician Juan Justo (1865–1928)—a prominent figure in the economic public debate, and noted founder of the Argentine Socialist Party in 1896—was a great admirer of Thünen and an advocate of Thünen’s theory of wages.

Some of Launhardt’s writings were widely read and also earnestly debated in the economic circles of Buenos Aires and he could also be credited for successfully disseminating von Thünen’s ideas in Argentina. Manuel Fernández López (1990, p. 389) teaches us that although Launhardt’s pioneering contributions remained ignored and largely unknown in Germany—and over much of the rest of the world—in Argentina his contributions to theories of location were widely read already by the late nineteenth century, and thanks to translations into Spanish prepared by Argentine engineer and professor Alberto Schneidewind.

A son of German immigrants, Alberto Schneidewind (1855–1934), had completed his degree in 1877 at the Royal University of Aachen that is located on the western edge of today’s Germany proximate the border with Belgium and Holland. Schneidewind registers as the one who first introduced the works of Launhardt in Argentina. Schneidewind worked as an engineer employed in Argentina’s public sector, wherein he served as general inspector for the expansion of railroads. Schneidewind was also active as a university professor at the University of Buenos Aires. For use in his lectures dealing with railroad planning, Schneidewind (1895) translated to Spanish Launhardt’s Theorie des Trassierens Teil¹¹ [1887] (1900–1902), a book that lays out principles of railway location theory. Schneidewind also lectured in courses on related topics alongside of some professors of note in local universities. Here we could include Argentines like Teodoro Sánchez de Bustamante and Carlos Ramallo, as well as Romanian economist Oreste Popescu. These instructors lectured both in the schools of engineering and in economics, programs which were part of the larger University of Buenos Aires. They also lectured at La Plata National University where Prebisch attended Alejandro Bunge’s seminars and where in 1920 Prebisch would be offered the position of assistant professor.

As a prominent professor and journal editor, Bunge could be identified as one of Prebisch’s most influential teachers. He spoke German fluently and had been educated at the Royal University of Saxony (what over time evolved into today’s Technische Universität Dresden). At Saxony, Bunge became a follower and later served as an influential exponent of ideas advanced by one Friedrich List (1789–1846) during the first half of the nineteenth century. List can be noted as an influential thinker advancing ideas emblematic of a German tradition and, whom Mark Blaug (1986, p. 130) notes, could also be considered a ‘frontrunner’ of the ‘dependency school of economic development’. Additional evidence of Prebisch’s exposure to German economic thinkers relates to his undertaking a translation of excerpts from the first chapter of the 1909 French edition of Adolph Wagner’s Grundlegung der Politischen Oekonomie¹² [1892], published in the Revista de ciencias económicas¹³ in 1919.

In ‘Raúl Prebisch and Origins of the Doctrine of Unequal Exchange’, author Joseph Love (1996, p. 134) references passages from Wagemann’s [1928] (1930) Economic Rhythm: A Theory of Business Cycles in which he employs both a ‘central cycle’ and a ‘peripheral cycle’ as metaphorical concepts—in his efforts to differentiate monetary and capital flows. Preceding Prebisch’s career as a professional economist by some years, the Chilean-German economist Ernst Wagemann sought to elucidate the dynamics of business cycles. In his efforts to account for the successive crises of capitalism taking place towards the end of the nineteenth century, Wagemann advanced an understanding that business cycles were primarily influenced by monetary variables. At the time of Wagemann’s research, the field of ‘Business Cycle Analysis’ tended to be based upon the observation of real economic activity drawn from data and set in time series. Eschewing a priori reasoning, Wagemann sought to apply causality for understanding crises as an integral part of selected business cycles.

In Wagemann’s view, capital flows out into the world economy from financial centres. Those national economies lacking in solid financial institutions are classified as periphery, as their necessary capital flows in from exogenous centres. In his book Konjunkturlehre¹⁴ [1928], Wagemann (1930, p. 257) draws directly from Werner Sombart’s ‘four basic structural forms in the world economic order’—in his efforts to analyse and classify different cyclical characteristics in each of these economic structures. Finally, in Menschenzahl und Volkerschicksal¹⁵ (1948), translated to Spanish language as La Población en el Destino de Los Pueblos (1949), Wagemann combines two traditions in German economic thought, namely, mathematical and historical approaches. Building upon Thünen’s premises advanced in his Isolated State, Wagemann [1948] (1949, p. 57–63) also draws from Sombart’s four basic structural forms and regions differentiated with respect to productivity of labour and capital employed. One result of these efforts is that Wagemann effectively divides the world economy into four distinct areas, with two referred to as ‘centre’ and ‘periphery’. In our understanding, Wagemann’s thinking symbolizes a conjunction of intellectual influences to which Prebisch was also exposed during his studies that involved location theory, business cycles, and statistical analyses focused upon the real economic activity taking place at the levels of regional, national, and world economy.

4 The evolution of centre-periphery in Prebisch’s contributions

The name Raúl Prebisch has long been associated with the field of Development Economics. However, in his early years Prebisch was focused upon international trade and later setting up and running Argentina’s central bank and dealing with monetary and financial issues pressing on his home country. Edmar Dosman (2008, 188–210) writes it was the military coup of 1943—that a few years later—would prompt the rise of Juan Domingo Perón to power and Prebisch would be ousted from his position at the central bank. This ousting marks the starting point for when Prebisch commenced broadening his focus to consider economic development across Latin America. We could also think of Development Economics as emerging after the Second World War when what had been colonial territories either won or just took more independence and sought to deal with and to undo legacies associated with colonialism and neocolonialism.

During his early years and prior to his taking the leading role at ECLA in Santiago de Chile in 1949, Prebisch was considered notorious for his pragmatic attitudes towards economic theories and schools of thought. Demonstrative of this characteristic, the Brazilian economist Celso Furtado [1985] (2014: Chapter 7) introduces Prebisch by recalling that he was viewed in Argentina as the great heresiarch. However, as Prebisch’s affiliations to schools of thought changed over time, so too did the ways he incorporated ‘centre-periphery’ into economic analysis.

Initially, Prebisch applied ‘centre-periphery’ in its literal, geographical sense. With time Prebisch began applying it more loosely—first as a metaphor and later as a clearly defined concept—for offering insights into business cycles in Argentina, what registered as his ongoing research topic for a span of more than 20 years. In his thought development, Prebisch began differentiating the appearances of business cycles as these emerged. Prebisch also advanced the application of ‘centre-periphery’ as a metaphor that he used to describe how international trade based upon Ricardian premises had transformed the international division of labour during the nineteenth century, leaving a developmental legacy for economists to consider and also attempt to mitigate and undo during the twentieth century.

Prebisch’s interest in business cycles proved enduring, and with his focusing upon topics in this field, he made frequent use of the conjugal term and also pioneered concepts and novel uses for ‘centre-periphery’ in economic analysis. In his 1921 journal article (noted above), Prebisch [1921] (1991a, pp. 93–175) had already observed that Argentine business cycles were somehow mirrored in cycles generated in fully industrialized economies and that were generating varying effects. Fundamental differences between business cycles taking place in centres and peripheries were implied, but not explicitly developed. What stands out as especially noteworthy is that Prebisch [1921] (1991a, p. 149) had employed a concept of ‘centre-periphery’ that emphasized its literal, geographic meaning in the context of settlement and colonization. For Prebisch, el centro (the centre) offered a geographic representation of hinterlands of Argentina, while la periferia (the periphery) referred to its maritime regions lining coastal zones. He explains that while in North America settlers migrated westward away from the Atlantic coastal centres to the interior of the continent in search of new lands for settlement, in Argentina, and largely related to the restrictiveness of a trade monopoly imposed by the Spanish crown, similar migratory movements towards new regions failed to take place. The early settlements that did appear in the middle of Argentina emerged along the transport route connecting to Alto Peru, which for some centuries served as the key administrative centre in Spanish South America.

His term la periferia would appear again in his 1934 article entitled: ‘La inflación escolástica y la moneda argentina’¹⁶. In this article, Prebisch [1934] (1991b, p. 344) considers the Argentine banking credit system from the perspective of business cycles, employing the term ‘centre-periphery’, but as an economic metaphor, for he introduces the notion that selected Argentine banks financed both foreign trade deals taking place within Buenos Aires (the centre), as well as agricultural activities out in the hinterlands (the periphery). In this 1934 article, Prebisch selects the port of Buenos Aires to represent the economic centre of the national economy, while the agricultural fields of the hinterland represent the periphery. He carried his analysis further, explicating that even if Argentine exports were—by and large—agricultural commodities; nevertheless, the final economic exchange would take place at the port of Buenos Aires. It is in this article that Prebisch began to grasp that foreign trade could indeed serve as the actual channel for transmitting business cycles, with an identifiable cycle transmitted through quantities and prices of exports.

The ‘Programa de reactivación de la economia nacional’¹⁷ registers as yet another publication in which Prebisch [1940] (1991b, p. 689) employs ‘centre-periphery’ as a conceptual tool. Two years later and in the article ‘Profundas alteraciones de la economia argentina provocadas por la guerra’,¹⁸ Prebisch [1942] (1991b, p. 728) again employs ‘centre-periphery’ not only as a category and tool to aid his analysis, but also as an economic metaphor, suggesting a somewhat different meaning than that which is found in his earlier writings. In this 1942 article, Prebisch compares how demand stemming from international and domestic sources served to differentiate foreign trade. More specifically, for Prebisch the international demand for Argentine output that served to stimulate the national economy takes place at the centre, while demand for domestic consumption is noted as stemming from the periphery.

From 1944 onwards, Prebisch utilized his understanding of ‘centre-periphery’ for understanding capital movements within the context of a world economy and the related business cycles. Prebisch [1944a] (1991e, p. 190), [1944b] (1991f, pp. 320–324) refers to London as the ‘international financial centre’ of a gold standard system. Prebisch argues that, although Great Britain had lodged itself in a privileged position economically, commercially and financially vis-a-vis other nations, by the end of the World War II Britain had lost her hegemonic position as the most important international monetary and banking centre. Replacing London, New York City emerged as the financial hub for the postwar era. In his article ‘La relación entre el ciclo argentino y el ciclo monetario internacional’¹⁹ published in 1944, Prebisch [1944b] (1991f, p. 320) commences with employing ‘centre-periphery’ as an economic metaphor seeking to account for these changes affecting the world economy.

In ‘El papel de las inversiones en los movimientos cíclicos argentinos’,²⁰ Prebisch [1944c] (1991g, pp. 372-3) notes that during the cyclical downturns of industrial economies, gold is reabsorbed from the metallic reserves of peripheral economies. For Prebisch [1944c] (1991g, p. 371), the Argentine business cycle responded to the international demand for commodities and foreign investments. Out in the periphery downturns were exacerbated by a contra-cyclical tendency of metallic reserves fleeing economic hinterlands for the financial centre. This contra-cyclical characteristic in gold movements allowed for credit expansion in industrial economies during downturns of the business cycle. Prebisch argues that in order to escape these sorts of contra-cyclical effects, Argentina would need to generate an ‘autochthonous’ cycle that would require increasing investments for producing intermediate and capital goods.

Also appearing in 1944, ‘La depreciación monetaria’²¹ [1944d] (1991h, p. 411) introduces ‘centre-periphery’ as an economic metaphor associated with the international monetary system within a larger world economy structure. What is particularly interesting about its usage in this article is that Prebisch explicitly criticizes economists working at the ‘periphery of the monetary international system’, which remain as firm believers in mainstream monetary theories developed in and for economies located at centres for banking and finance.

From the years 1944 to 1949, Prebisch’s understanding of ‘centre-periphery’ became established as a mature concept, marking a radical change in his ontological understanding and methodological approaches. The meanings of ‘centre-periphery’ found in his publications starting in 1944 offer a clear sign that Prebisch had entered what he—himself—defined as his “first intellectual stage” that would run until 1948. In ‘Antecedentes y proyectos de creación de un Banco Central en Argentina’,²² Prebisch [1944e] (1991i, p.1) purported it necessary to generate novel economic principles based upon concrete measures drawn from countries outside of the principal monetary centre of the world.

From 1944 through 1948, Prebisch relied upon his earlier advances in centre-periphery analysis as a tool for dealing with monetary theory and policy. In his series of eight articles that form his ‘Teoría Dinámica de la Economía’,²³ and that are based upon a series of lectures that he had presented in México in February of 1949, Prebisch [1949a] (1991j, pp. 410–89) considers how business cycles diverged, generating differing effects on the centre and the periphery. These lectures, together with his recently published ‘Manuscriptos…’ [1948] (2018), can be considered Prebisch’s most polished presentations on these topics, with these two series of lectures being presented just a few months before his arrival in 1949 in Santiago de Chile for starting his post heading the United Nations office of ECLA.

In his articles noted, and also the Manuscript cited above, Prebisch advances the idea that business cycles in Argentina (a peripheral economy) should be understood as an economic phenomenon generated as responses to international financial flows, and not as endogenously caused. Of note is what Prebisch formulated as a ‘peripheral cyclical model’ did not include any explicitly stated equilibrium as it is an integral part of a global and dynamic business cycle.

By 1949, Prebisch had shifted his earlier focus from emphasizing a monetary analysis of economic dependency to a physical, structural dependency expressed in the specializations of labour and categories of export commodities. At the start of his several year work stints at ECLA in Santiago that same year, Prebisch cited ‘declining terms of trade’ as one of the deleterious tendencies affecting South American economies. Once Prebisch’s conceptual and empirical perspective—with the data collected and analysed by Hans Singer—that embraced concepts of centre-periphery was fully advanced, he went forward with applying his knowledge to highlight complexities found in processes of economic development.

With this in mind, Prebisch needs to be recognized and appreciated for opening up inquiries into the phenomenon of ‘economic underdevelopment’ that would later be extended by some of his colleagues at the U.N.’s ECLA office based in Santiago. This includes the Brazilian economist Celso Furtado. These later advances follow the views originated by Prebisch, namely, that exogenous economic forces emanating out from a centre played themselves out by engendering deleterious effects on peripheral economies. For Prebisch, specificities of the peripheral business cycle had gotten shifted into the periphery’s specialization in the international division of labour leading to a persistence of underdevelopment.

In ‘El Desarrollo de América Latina y sus Principales Problemas’ [1949b], (1991k, pp. 490–551), Prebisch delivers finishing touches to his understanding and uses of centre-periphery, offering a synthetic interpretation of the world’s industrial arrangements resulting from the international division of labour—that in the nineteenth century drew from the ‘Law of Comparative Advantage’ advanced by David Ricardo in the early 1800s. Prebisch held the position that a worldwide application of Ricardo’s ‘law’ during the century of Great Britain’s dominance had divided the globe in two unequal sides with respect to the special distribution of production and composition of output—a similar conclusion to that given by Wiser on the segregation of urban and rural areas as noted above. The end result is a world economy with a relatively small geographic area specialized in technology-intensive manufactures and another, much larger spatial area devoted to labour-intensive agricultural commodities producing and supplying raw materials and food stuffs while demanding manufactures and capital goods from the centre.

5 Expanding ‘centre-periphery analysis to dependency theory and world systems

During the decades of the 1960s and 1970s, the category of ‘centre-periphery’ and its applications to economic and social analysis went through what can be described as an ‘expansion’ from its core domain to adjacent areas—in the sense that this approach was discovered and also started reaching a large, if not a global, audience concerned with the initial emergence and enduring persistence of inequalities between regions and nations forming the world economy. Within this theoretical genre, we can trace the utilization of a ‘centre-periphery’ approach to a host of scholars and their writings. However, Andre Gunder Frank’s Capitalism and Underdevelopment in Latin America (1967) registers as what we consider as marking the first occasion that a ‘centre-periphery’ (core-periphery) approach was introduced to a large readership—with much thanks to Monthly Review Press. Frank’s Latin America: Underdevelopment or Revolution (1969) registers as a second and especially influential and widely distributed book further advancing this ‘centre-periphery’ tradition that helped provide a foundation for the emergence of research into economic dependency that could be extended to the field of ‘World Systems’. That Frank continued authoring additional books and articles, this steady stream certainly helped broadened and deepen awareness of the usefulness of a centre-periphery approach to analysis. Much like Prebisch, Frank extended the use of ‘centre-periphery’ to include a focus on what had been coined as ‘economic underdevelopment’. For Frank, this designated and defined a process and a phenomenon that could be related to the articulation of a dialectic relationship between more advanced economies at a centre, and less advanced economies forming a periphery. In addition to works of Frank, we can add Dependency and Development in Latin America (1969), a book co-authored by the Brazilian sociologist Fernando Henrique Cardoso and Chilean historian and sociologist Enzo Falleto.

What we can note is that these three authors cited above built upon Prebisch’s applications of ‘centre-periphery’ to the South American setting by extending their analyses to advance what took off as a widely accepted ‘Dependency Theory’ that complemented research into economic ‘underdevelopment’. A bit different from el economista Frank, books authored by Cardoso and Falleto offered sociological interpretations of Latin America based generally upon Prebisch’s approach to ‘centre-periphery’.

We can note an observable tendency for Frank, Cardoso, Falleto, and some others to fit ‘centre’ and ‘periphery’ into their distinctive research agendas as general categories. We would like to stress that this orientation departs from Prebisch’s evolving efforts which we find remained true to the influences of Thünen’s understanding of ‘centre-periphery’ in its original way, and, namely, as a spatial categories. Moving along theoretical lines more similar to Prebisch, Brazilian economist Celso Furtado (1959) would rely upon his research into the case of the Brazil’s Northeast as a way to advance a clearly delineated theory of subdesenvolvimento econômico, his signature and case-specific understanding of economic underdevelopment in his native Brazil.

After completing his doctoral studies at La Sorbonne in Paris in 1948, the following year Furtado joined Prebisch at ECLA in Santiago and worked with him for a period of 8 years. Furtado’s research into the phenomenon of underdevelopment and a theory to explain it remains true to Prebisch’s influences. For Furtado, economic underdevelopment needs to be considered as a function of differentiated productive regions. That is, Furtado related economic underdevelopment to heterogeneity in production structures located within a closed economic system. Considering the complex character found in Brazil’s Northeast, Furtado based his example of heterogeneity of production structures on the proximate juxtaposition of globally oriented sugar plantations along the Atlantic coastal zone (litoral açucareiro da zona da mata) with the subsistence-based economy characteristic of the adjacent sertão located close by and defining Brazil’s hinterlands. As a note, this term ‘sertão’ could be considered an abstract concept applied by Portuguese explorers and early colonizers to define unknown territories with untapped resources: holding such things as indigenous slaves for labour; fertile lands for farming and ranching; and mines rich in motherlodes of ores that could be discovered across Brazil (see Rama and Hall: 2019, pp. 670-2).

Research into Furtado’s intellectual legacy suggests that his doctoral studies in Paris brought him into contact with methods and economic analyses advanced in particular by French economist François Perroux, a professor at La Sorbonne who studied in Vienna and Berlin in the 1930s and was powerfully influenced by traditions distinct to German thinkers, sometimes associated with, but not limited to, the latter-day German Historical School, a tendency that can be identified in approaches of Werner Sombart and Joseph Schumpeter, to give just two examples. Starting with Perroux when Furtado studied under him in Paris, we can trace these influences rooted in German traditions in economic thought that got carried over into what is known as ‘Latin American Structuralism’, an approach to economic analyses that Furtado and Prebisch would endeavour to advance as they worked together in Santiago during the 1950s.

6 Traditions in German economic thought carried over to South America

Indeed, Prebisch registers as a profound and creative thinker—as well as a prolific writer—who assimilated his ideas from disparate doctrines collected during disjointed phases of his professional career. Though laudable, this feature unfortunately renders singularly categorizing Prebisch’s scientific contributions as especially difficult. However, what we can note within the framework of this inquiry is that Prebisch seems to have been decisively influenced—in the main and throughout his long and productive professional career as an economist—from contributors whose ideas could readily be linked with noted strains of thought in the discipline of Economics that draw from the Germanic realm. In our understanding, the German thought tradition holds that economic activity does not take place in the minds of thinkers as a priori constructs. Rather, the Germanic tradition that remained influential over much of the nineteenth century to just beyond the mid-twentieth century holds that economic activity takes place in real time (Zeit) and space (Raum). While these principal tendencies are surely found in the German Historical School, even thinkers deeming their approaches independent of this school have tended to use these assumptions as the starting point for their inquiries. What this suggests is that the German tradition in economics relies upon the drawing of data generated through economic and social activity, which can then be compiled and analysed, giving rise to hypotheses formulated through the use of the inductive method.

Some decades back, historian Joseph Love had already suggested the likelihood of German influences among South American thinkers. Love (1980, pp. 62-3) teaches us that Prebisch probably came into contact with a ‘centre-periphery’ approach that served as his foundation in economic analysis through his direct and indirect contacts with economists stemming out from the German-speaking realm, with some born to immigrant families already established in both Argentina and also Chile. Though the writings of Prebisch have been considered by a host of authors, his early influences and early uses of centre-periphery—commencing with his research into business cycles—have tended to remain neglected. We feel that our efforts herein have now shed some needed light on these influences.

While mainstream economics has been based in the main upon the hypothetical-deductive method, narrowly focusing upon prices movements and partial and general equilibrium analyses, our research has clearly demonstrated how Prebisch followed a more involved framework based upon the development of concepts allied with empirical research, while observing the interdependent parts of the world economy. Our research findings suggest that indeed Prebisch was able to consider empirical evidence of diverse economic phenomenon and then formulate and attach new meanings to them based upon an instrumental concept: that of ‘centre-periphery’. We acknowledge and also laud the evolutionary character stemming from the ‘flexibility’ with which Prebisch applied centre-periphery. Indeed, his ability to advance novel uses and applications of this approach to analysis assisted in establishing a legacy that still endures for researchers and policymakers in the Economics profession today.

7 Conclusion

What we have sought to stress with this inquiry is that Prebisch adopted a ‘centre-periphery’ approach early on in his research efforts, and that first appears in ‘Anotaciones sobre nuestro medio circulante’, his very first article that was published in 1921. Once started down this methodological track, Raúl Prebisch continued to creatively apply ‘centre-periphery’ over subsequent decades. With the steady appearances in many of his articles, ‘centre-periphery’ became integral to what with time emerged as a viable concept within Development Economics. After departing Argentina in the 1940s, Prebisch shifted his professional interests towards more abstract intellectual efforts so that he could consider the historical and structural issues that he judged had stymied the advancement of economies across Latin America. That he led the United Nations office in Santiago starting in 1949 placed him in a favourable position for advancing policies promoting an import-substitution industrialization of economies located out on the periphery, in his earnest effort to offset the enduring economic legacies of Pax Britannica that—in the main—had fettered industrialization while promoting economies oriented towards an enduring dependency on commodity production for export on to world markets, as generous suppliers for populations based in regional and national economies located at the ‘centre’.